Once upon a time, "summer hours" were common in the publishing industry. Now it looks like they may spread to other industries. The nature of international business won't make it possible for everyone to shift to a 4-day week, but it would be interesting to see other areas where it could work.

At the very least, it appears to offer some economic benefits, and possibly some significant environmental ones as well.

There are lots of folks here in the US who would secretly (or not so secretly) enjoy the idea of the Chinese economy imploding, but they underestimate the effects on the US economy. If the Chinese economy implodes, who will buy the Treasurys that are funding US deficits and deficit spending? What happens if the US government has to come up with the cash it needs on its own, without its lender of choice -- who then foots the bill?

Friday, July 24, 2009

The fine folks at Zillow keep sending the Commission helpful e-mails about the declining value of the 108Warren Commission homestead, but at least they are not that bad.

Unfortunately, our hometown has accepted funds from the state to buy up distressed property in foreclosure. While this may be some help to the folks who own those homes, the city will be paying foreclosure-level prices for the property, and that will do wonders for property values in the rest of the city... Looks like we can expect more love-notes from Zillow!

Among the myths that Ms. Demyanykon busts are the belief that Subprime loans went only to borrowers with impaired credit, and that subprime borrowers were offered low"teaser rates."

Mr. Carney correctly points out that this is a good "reminder that many of the popular explanations for our mess are way too simple," but he seems to have missed the part that the 108Warren Commission finds so troubling. A significant portion of the new regulatory framework that is being debated on Capital Hill is based on exactly these same myths.

When we legislate and regulate based on an inaccurate understanding of what happened, how can we even hope that this legislation or regulation will do any good?

In the past, for writing bad checks to be a criminal offense, there has to be intent. Mr. Ayers notes that in Nevada, the law as written is a different, assuming intent to defraud if the author of the bad check does not make the check good in 5 days.

Mr. Ayers questions whether it this is fair or correct.

Under this provision, if you bounce a check and don’t make it good within five days, you are presumed to have intended to defraud the payee and can be subject to criminal punishment. This presumption is unconscionably broad. If you mistakenly thought that you had enough money in your account and then find that you do not, you can go to jail. I’ve bounced checks by mistake in the past, and this presumption scares the bejabbers out of me.

Like Mr. Ayers, the Commission has bounced a check (once), and the idea that it could be treated as a criminal act is scary.

At the same time, there is no law that requires consumers to use checking accounts, and the use of checks comes with the moral and legal responsibility to not write bad checks. This is one of the few times when the Commission has felt that Mr. Ayers is off track. Even though he makes a reasonable point in tying the Nevada legislation to the casino trade, that does not make it a bad change in the law.

If you write checks, you are responsible for making sure that there is enough money in the account to cover them.

Today, Danger Room did another follow up on the battle between the Pentagon and Congress over the F-22.

Congress is trying to force the Pentagon to buy more of the F-22 Raptors, while the Pentagon has decided that they already have enough, and do not want to spend any more money on them.

It brings up an interesting point. Nominally, Congress retains the right to make buying decisions for the country -- it comes with the power to tax and write appropriations. Yet for all practical purposes, congress assigns this power to different government agencies that use their institutional expertise to determine how to spend the money.

It seems reasonable that the Pentagon knows more about weapons being bought -- their strengths, weaknesses, and appropriateness for current and future military threats -- than the current members of congress. Of course, the person in charge of the Pentagon, is a political appointee, but in this case, President Obama has kept President Bush's appointee. So the current Sec Def is likely about as non-partisan as possible.

Now the Pentagon is more than just the Secretary of Defense, and there are likely a lot of folks there who have independent opinions and may still think that we need the F-22s. So Senators and Representatives are able to find "defense experts" who think that we need more Raptors, but let's be honest -- The congressmen and congresswomen pushing for more F22s are the ones whose districts benefit from their construction.

At $250 million a pop, the decision to add 7 more run to about $1.75 Billion -- with a B...

While the Commission feels strongly that congress should be independent of the executive branch, in issues of defense procurement, there should be a pretty high bar before congress starts meddling in individual weapon-systems procurement...

By why is the Commission interested in this, you ask? Secretary Gates is now making an economic argument -- every dollar spent on the unwanted planes is a dollar taken away from our forces in Afghanistan...

Is this accurate, probably not. But if the broader media picks up on this, you can bet it will be effective...

Thursday, July 16, 2009

Well, one month left until the Tracking Label provision of the CPSIA (Consumer Product Safety Improvement Act) becomes law, and yet there has been no guidance (as in ZERO) from the CPSC (Consumer Product Safety Commission) as to how companies should proceed.

Like so much else related to the CPSIA, this provision sounds good to begin with -- Products intended for children must have labels that clearly indicate to consumers the manufacturer, date and location of production, as well as lot and batch information. This is designed to make it easier to recall any tainted products.

There are lots of things wrong with the Label provision, as others have written about more clearly than I can... See:

It is unimaginable to the Commission that the government could allow a major change to something so basic, without providing any guidance on how manufacturers are supposed to comply.

These labels are not only problems for importers from China -- it is just as big a problem for domestic companies, and along with the remarkably incoherent testing requirements is simply driving small companies out of business.

The saddest part is that none of this will make children safer. There were lots of ways to address risks to children, but in creating the CPSIA, Congress and the President (and it was President Bush who signed it), seem to have ignored every one of them in creating this law.

At issue are the fees paid by retailers on every single credit card transaction they process. Some folks don't realize it, but when you pay for an item with a credit card, the retailer is making 2%-3% less then they would if you paid with cash or a check. Retailers would like to have this rate reduced, while issuing banks are adamant that the fees should not go down.

The Times appears to be approaching this story from the Retailer's perspective, and in doing so, glosses over the reasons credit cards exist in their current form.

Yes, banks make significant fees from processing these transactions, these fees help provide the incentive for these firms to continue to offer consumer credit, and along with their interest income, offset the risks inherent in the business.

But the banks aren't the only ones who benefit --retailers benefit too.

Imagine for a moment, a world without bank issued credit cards... Retailers would have to accept far more cash tranactions. Additionally, in order to increase sales, they would likely develop independent credit facilities -- i.e. store credit accounts -- and accept a large number of checks.

Sound familiar? That pretty much describes the world before Credit Cards. Granted, it was a simpler time, but what about the drawbacks?

Retailers had far more physical cash on hand. More cash on hand sounds like a good thing, but in reality, it forced more banking transactions, required more on-site cash management, and significantly increased security needs -- all at additional cost to the retailer.

Issuing store credit sounds great, but it moves all default risk to the retailer. It doesn't take many defaults to start adding up to a lot of money. It also requires retailers to have active credit departments -- with all the inherent staffing costs that entails.

Accepting more checks, also increases the number of banking transactions, and puts the retailer at risk of accepting checks that bounce.

These issues are a large part of what drove the market for modern credit cards, with banks taking on these risks.

The question really comes down to this -- do those potentially increased costs total up to more than 2%-3% of each CC sale. They sure did -- that is why we have seen an explosion in CC acceptance over the past 30 years.

Whether those rates are still appropriate, or have become too high is a market discussion, and one in which the government should play no part. If the rates are too high, and the costs to retailers is too much for the market to bear, then the market will resolve the issue independently. Among the options:

1) Retailers start to discourage CC use, and the CC issuers, seeing a decline in business reduce their fees to an equilibrium rate.

2) Seeing an opportunity created by the high processing fees, a new player enters the market with competitive rates and the market reacts.

3) Retailers develop their own Credit processing network and compete directly with issuers.

I am sure that readers can think of many more.

The government's only role should be making sure that they are not interfering with the market's response to this issue. New competitors should be allowed to enter the market and earn the same regulatory acceptance that current players now enjoy, without undue bureaucratic hurdles placed in their way.

Wednesday, July 8, 2009

For years, the 108Warren Commission has been skeptical of "Job Retraining" programs.

The programs are funded by state and federal tax dollars and are designed to help educate folks who have spent the bulk of their career in jobs that are no longer economically viable so that they can move on to a new career. On its face, this sounds like a great idea, and one that most taxpayers would be reasonably comfortable paying for.

Skeptics on the other hand, have pointed out that the employees most commonly displaced are those with the least education, and those least likely to be successful in developing new skills. While some have college degrees, most have not seen the inside of a classroom since they graduated from High School 20 years earlier. Even discounting the likelihood of potential age discrimination, the challenges facing "retrained" members of the workforce are not easy to overcome.

Now, in a bit of a surprise, the New York Times is pointing out the pitfalls of "Job Retraining." In an article on July 6th, Job Retraining May Fall Short of High Hopes, Times reporter Michael Luo points out the challenges faced by a group of Michigan residents who are going through, or have already completed "Job Retraining."

As an added bonus, Mr. Luo's article also pointed out a "little-noticed" study by the department of Labor that highlighted the same issues. For a link to this study, please CLICK HERE. Be warned, the factual conclusions are not highlighted in the Executive Summary -- in fact, the Summary appears to be cherry picking positive statements somewhat out of context.

As a concept, helping employees in displaced industries develop new skills so that they have improved odds in the job market is a good thing, but it is not a panacea. The reality is that the best thing we can do for employees in industries that are being displaced is to begin to train them for new opportunities while they are still working, and for that, the workers have to take the lead themselves.

As in most things, employees taking personal responsibility for their careers will be able to set themselves up with more options than those who don't.

Written in an AnswerMan format, the post highlights the contradictions and confusion surrounding the CPSIA.

Regular 108Warren Commission readers will recognize this as a familiar topic -- see my earlier post here -- and others will recognize the topic from other writings over the past few months.

For those of you who may have missed it, the Consumer Product Safety Improvement Act was passed by Congress and signed by President Bush in response to the rash of recall notices on products made in China during 2007 and 2008. It was passed in 2008, with provisions going into effect in staggered fashion throughout 2009.

This should go without saying, but 108Warren Commission is completely in favor of product safety -- particularly for children's products. Unfortunately this law does absolutely nothing to make children's products safer -- instead, because of its complexity and contradictory nature it hurts those company's that try to comply, and simply eases the way for the unscrupulous to compete with honorable companies.

What is particularly troubling is that despite the deep and thoughtful issues raised by the people who are affected by this law, there has been no response from Congress. The legitimate concerns are routinely ignored, or even worse, are tossed aside as carping. Even the Consumer Product Safety Commission has made it clear that the law, as written, is too restrictive, and does not allow the CPSC to use its institutional experience and expertise to actually make products safer for children.

Instead of working to resolve fundamental issues, Congress is ignoring them, and small businesses across the country are failing. Libraries and schools are restricting access to books published before 1985.

In the coming month, companies are going to be required to comply with another part of the CPSIA -- new tracking labels that identify the source factory (whether that is proprietary information or not), and batch and run information. While this sounds reasonable at first, think about how to put it into practice, and the problems start to jump out at you... Where does the label go? How large does it have to be? do I have to list my actual factory so that my competitors can go then go contact them directly? What about for small items -- how do I fit a label on something small... the list goes on and on.

Sadly, with just over a month to go before this provision is active, there is ZERO guidance on how businesses can comply with this law... Faced with these burdens, and in a down economy, this will push even more businesses into trouble, and will put more people out of work.

Wednesday, July 1, 2009

The Payday Loan business has quietly grown into big business, without much fanfare. That is beginning to change, and people are beginning to question some of the business practices, and whether or not they are a burden on the communities they serve.

Devona Walker on The Loop makes a compelling case that Payday Lenders's practices are wildly unfair in her article: "Payday loan sharks feed on the black community." Her argument is that this industry is ripe for regulation, and that even with heavy regulation, the industry would still be profitable. She takes on the Wall Street Journal's take directly, and her comments on customer satisfaction are absolutely priceless.

It is awfully hard to stomach the idea of a structured loan with interest and fees that annualize to 390%.

At the same time I do tend to agree with the Journal's assertion (based on recent research research by GWU professor Gregory Elliehausen) that borrowers are rational, and fully informed on the costs of the loan. Honestly, a large percentage of Payday borrowers are repeat customers, so it would make sense that they are aware of the true cost.

With an average APR on a two-week checking account overdraft at 1,067% (from a WSJ analysis of a 2008 FDIC study of Overdraft protection), payday loans don't look like such a bad option, but I am not sure that is a reasonable comparison.

The larger issue that this comparison ignores is that for a significant section of our population payday lenders are the only option. When banks and credit cards are out of reach for living paycheck to paycheck, what choices do they have.

On the other side of the coin, market economics teaches that prices are not set in a vacuum. If the prices for payday loans were too high, people would stop using them, and similarly if they were too debilitating to individuals and the community the lenders would loose customers and fail.

Is better regulation the answer? Maybe so, but like fire and government in general, regulation is a very dangerous tool, and should only be used as a last resort.

I wonder if the new availability of micro lending here in the US will offer competition to the payday lending market. Apparently there is enough of a market to support at least 2 micro lenders in the US so far -- check your Google listings for additions to the list...

Is competition from micro lenders enough to bring down payday loans? Probably not, but it can't hurt.

If you don't mind sitting in the cheap seats, Major League Baseball is still one of the great family entertainment bargains around. While the 108Warren clan tends to go to minor league games more often -- baseball is one of the few sports where the whole family can afford to go to a major league game on a whim.